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The High Social Cost of Low Corporate Taxes

by Workers International League - Portland Monday, Aug. 06, 2007 at 7:15 PM

It is now taken for granted that social services in the U.S. will be under-funded – if they are funded at all. This isn’t because average people think that such things are unimportant, but because we’ve been taught by “our” representatives in government that even a miniscule social safety net is economically impossible (it is never explained why – it just is). As this approach continues to dominate mainstream political life, the living standards of working people everywhere are being destroyed, and the meager reforms politicians have always promised us have devolved into even tinier crumbs and counter-reforms. Indeed, reforms that benefit the working class seem to be impossible in Washington now-a-days, precisely at a time when the wealth of the country has never been greater. To make sense out of such irrationality, one has to consider that this issue isn’t limited to the 50 states of the U.S. – it’s an international problem, and its cause is no accident.



A good example is the horribly mis-named Job Creation Act of 2004. This bill was the result of years of struggle in the international courts of the World Trade Organization (WTO) between the European Union (EU) and the United States. The EU won a decision that said the U.S. must stop subsidizing their native corporations (giving U.S. corporations a trade advantage, and thus violating the ignored-when-convenient policy of “free-trade”). The U.S. Congress reacted swiftly, and engineered a way to indirectly subsidize their native corporations by eliminating taxes.

The result was the Job Creation Act. No new jobs were created. In fact, as often is the case with government doublespeak, just the opposite took place. What the Job Creation Act did do was drastically reduce corporate taxes on foreign-earned profits. At a time when being a global conglomerate is now commonplace, the billionaires ended up saving billions. In order to disguise the corporate giveaway in working-class attire, the help of mainstream economists were enlisted. As always, these esteemed professors, with the aide of incomprehensible rhetoric, were able to interpret a policy aimed at helping the rich into something that “benefited everybody”. Their arguments amount to this: When corporations have extra money, they put it to work by investing, so more workers are hired, and more working means more spending, which means more jobs. It’s Economics 101 – and it’s a lie.

Generally speaking, “expansion” in the current era of capitalism is not about creating jobs, building new factories and infrastructure, etc. Rather, the capitalists see “expansion” as slashing jobs, ignoring investment, and closing factories so as to increase profit-rates. The Job Creation Act allowed the mega-corporations to save billions of dollars, which allowed them to devour smaller corporations, leading to an all too familiar outcome: a corporate merger takes place and thousands of workers lose their jobs. Some of the corporations used these savings to build plants overseas to take advantage of the slave-wages in poor countries.

The social consequences of these policies are of no concern to the business moguls; for them it’s a matter of profitability and survival. When the issue of foreign-earned profits was first being debated, U.S. capitalists broadcasted panic-stricken warnings: “Europe’s corporations pay no overseas taxes! Either we follow suit or lay down and die!” When the interests of the rich are threatened, “our” representatives act quickly: the taxes were of course removed, and the burden of funding the social programs that remain fell even more heavily on the working-class.

Indeed, in the present stage of capitalism, every hindrance to growth – living wages, pensions, health care, corporate-taxes, environmental safeguards, etc. – i.e., any scrap of social responsibility, must be reduced to the bare minimum.

A now-common example of this trend can be found in Oregon, where people recently awoke to an incredible headline: “Corporate tax may stay at ”. As the Oregonian reported: “Most households pay far more in state taxes than the paid by nearly 23,000 Oregon corporations, including 26 with Oregon profits of more than million each.”

This in a state that for years has struggled to raise money for education and basic social services.The shock-value was not lost on this writer alone, as subsequent Letters to the Editor made clear, the outrage was overwhelming.

The international character of this phenomenon is unmistakable. Governments across the globe are facing “funding crises”. Somehow, in an era where more wealth exists than any other in human history, there just isn’t enough money to go around. Meanwhile, the short list of global billionaires grows at its fastest rate ever. It is this obvious link that the puppet politicians are forbidden to make. Instead, they demand that workers make concessions, all in the name of the “free-market”, which as we have seen, is not at all “free” from government manipulation in the interests of the corporations.

To combat this, we must first of all be informed as to the real causes of the under-funding of social programs. Corporate-owned politicians aide in the miseducation by pointing the finger at “greedy workers” (those who make a living wage and have health insurance), “parasitic immigrants” (any non-U.S. born worker), or foreign countries in general (“Buy American!”). Republicans use the issue to gain support by hollering about the need for tax-breaks, since most people hate paying taxes, especially when you get nothing in return. But the rich and their corporations are always the greatest beneficiaries of these policies, and always at the expense of the rest of us.

Whatever scapegoating is used, the motive lies the fact that there is a conflict of interests between the corporations and their billionaire owners, and the rest of humanity. Suggesting that this contradiction can be resolved by chaining corporations to their country of origin is naïve, since the pursuit of greater profits long-ago forced them overseas. The only real solution to this problem is the nationalization of the big corporations under the democratic control of the working class, so that there no longer remains a clash of interests between the wealth of the world and the well-being of society.
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